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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good afternoon, and welcome to this presentation of the results of the Danieli Group. We will be discussing the results together with the President, Gianpietro Benedetti; the Head of Human Resources, Camilla Benedetti; as well as the CEOs, Giacomo Mareschi Danieli and Alessandro Trivillin. We will also be talking about technology with the Head of R&D, Rolando Paolone; and with the Head -- Director of Danieli Automation, Mordeglia. We will also be discussing financial data with the help of the Head of the Group's Management Control, Michele Marinutti; and the Head of Finance, Alessandro Brussi.
This sharing of results will see the involvement of our viewers as well through the chat. You will have the opportunity during this live streaming to make questions. And we will be answering to some of these questions at the end of the presentation and before the conclusions.
So before starting with the presentations, I'd like to give a brief overview of the group results for the financial year 2018, 2019, ending on the 30th of June 2019. Just some data, revenues exceeded once again EUR 3 billion. The EBITDA gross operating margin was close to EUR 240 million while the net EBIT operating margin was stable above EUR 100 million. The EUR 67 million yearly profit marked a 15% increase from the previous year. Also, the cash and the order book grew as did the number of employees, which is now just over 9,500 units. So these figures are better than data from the previous year and confirm the solidity of the Danieli Group.
After these important facts and figures, we should focus in detail on some other data, and we will do this together with the Chief Group Controller, Michele Marinutti. So Mr. Marinutti, what figures are the most telling or what was achieved this year?
We reported revenues of EUR 3.1 billion with an increase of 13%. And net profit at EUR 67 million with a 15% improvement and the net financial position is at EUR 928 million, up 11%. Just a few figures, but they clearly show the amount and effectiveness of 1 year of work as well as the solidity of the group.
What are the main activities that brought about this result?
The result is based on 3 pillars: profitability, flexibility and digital transformation. First is profitability. That increased by 15% through a strong and cost-cutting action to contain extra costs on over 2,000 orders, with the launch of a program to optimize costs and cut waste, with a radical reorganization of the businesses and products that were not meeting the targets fixed by the group. And finally, thanks to the excellent growth in volumes and margins of our service division.
The second pillar is flexibility. Year-after-year, we have continued to implement it by linking market trends with workloads and scaling our 25 business units and 7 product -- production plants according to productivity benchmarks.
Finally, we are seizing the opportunity of digital transformation. For example, on the one hand, we have the RPAs, virtual robots, we are using to automate repetitive and low-value activities. On the other hand, we are developing machine learning algorithms to anticipate trends and risks on the projects.
In conclusion, we are working to make our group more and more concrete, sustainable and dynamic.
Thank you, Michele Marinutti. First, we are focusing on what has been achieved so far. So we have talked about the group, and now we are going to be focusing on the steelmaking division with one of its Chief Executive Officers, Alessandro Trivillin. So Mr. Trivillin, how was this business here?
Overall, this was a positive year, and despite a very variable market, we have shipped about 1.3 million tons and they allowed us for the first time to go over 1 million in terms of turnover, also with an EBITDA of EUR 180 million. Then we generated a cash flow of EUR 145 million, of which EUR 118 million was allocated to the investments. And these EUR 118 million have brought to EUR 500 million the total invested in the last 6 years. So this was a huge economic effort to support the growth and the development and the solidity of ABS.
And looking ahead, how do you see the market?
The common feature in all the markets are the oscillations, and they are becoming more and more frequent and faster, so the alternate positive moments and negative moments. We know it. We are organized to manage them and to face them. And we've got a 2-level strategy. The first level represents a contingency strategy, which gives us 3 tools: so flexibility, responsiveness, and competitiveness. So they are self-explanatory.
Then, a second, more prospective level is based on the customers, the sustainability because we want to interpret it in a concrete way, in a pragmatic way and with innovation, with the ambition to be recognized by the market as the providers of solutions and not simply as steel producers.
I would like to give you 2 examples of innovation. So the Q-ONE in Sisak launch and the new quality wire rod. So the wire rod rolling plant designed with the most advanced Industry 4.0 logic, which is expected to begin production in September 2020. So investments, strategy and we are facing all of that by knowing that we have created over the years a professionally prepared and motivated team. So we have top-level know-how and an ability to do the work combined with the huge investments made in the plants, which give us the peace of mind of being able to confront all market situations.
Thank you, Alessandro Trivillin, for your words. We could understand that technology and innovation are 2 keywords for the Danieli Group. The Head of Technology and Development is Rolando Paolone. So I'll be asking him, what have you been doing in this sector?
We are, first of all, consolidating the technologies we have introduced in recent years. For flat products, we have upgraded a plant for the American giant Nucor Steel in Kentucky. It's a QSP thin slab rolling plant that will produce 3 million tons of hot strips a year with a single fast casting line that doubles the productivity of existing castings, improving quality and providing a wide range of steel grades. Our technology is a true revolution for the manufacturer. The initiation of thin slab technology 20 years ago that has decided to make it a qualitative leap and enter a new market mainly dominated by long-standing producers using the integrated cycle. This choice is perfectly consistent with the history of this client and was made by our advanced technology. This is one of the important orders made to Danieli by world-class producers that are highly competitive and a step ahead.
The Techint Group, main producer in Latin America for the Ternium subsidiary, has entrusted Danieli with the handling of over 4 million tons a year of steel slabs to be used for the production of plates at its plants in Mexico. This work includes the installation of automatic cranes, the identification of deposition for correct pickup, reading of the type of steel and storage. Operations are fully automatic and this is a good example of digital Industry 4.0.
In this sector of high-speed rails, it is worth mentioning the order for Evraz Pueblo mill in the United States. The plant will produce 100 meters rail of brand-new quality in a market that does not follow specific standard but rather adapt to the specific technological knowledge of each user. And therefore, it is very demanding in terms of flexibility and quality of the final product. Evraz has chosen Danieli to implement their new plant because of the flexibility of the mill, which can be used to obtain a diversified production as required by the market. In the meantime, we started producing a 4-rolls sizing block, named Drawer, used for the production of quality bars with high-precision tolerance and free of shape effects, the perfect round.
We have 2 plants in operation, 1 in Central America and the other in Italy. This technology increases our customers' competitiveness because it allows them to skip certain processes and, therefore, reducing the cost of processing, an excellent competitive advantage for customers.
Well, these are interesting innovative developments. Which technology is real breakthrough, do you think?
In recent weeks in China at Shougang Jingtang, we have launched the first strip mill, which is unique in the world, can work in an endless mode, which means uninterruptedly from casting to rolling as well as semi-endless or coil-to-coil mode. This line adjusts to the production mode to the requested steel type and product size. In practice, it can produce ultra-thin and ultra-thick products with a wide range of steel grades and widths. Thanks to a patented layout configuration that allows for endless, semi-endless and coil-to-coil operations. Finally, thanks to 2 edging units and 3 descalers, it is possible to obtain a product with excellent quality edges and surfaces. It is one of the kind. We expect it will prove very profitable in the market.
Okay. So that's what you've been doing so far. But is there something else in the pipeline for the future?
Still on the subject of innovation, our group research center is working on several solutions and ideas that will allow us to improve the state-of-the-art with regard to, for example, the cleaning of steel from unwanted alloys, such as copper as well as technologies that will help minimize CO2 emission in the atmosphere. To improve safety, we are developing technologies that reduce man operations in higher-risk areas. It is an investment to make steel sites increasingly safer and attract qualified technicians with the necessary knowledge to manage the most modern technologies.
Thank you, Rolando Paolone. So from Research and Development, let's move to another key aspect, the market. We will be addressing market issues with the President, Gianpietro Benedetti. So let's focus on the market. What is the current situation and what are the prospects?
Well, I'd say that, right now, the market has to be considered under 2 different phases. So we've got a medium-term phase, there is contingent on the current volatility and then a more medium- to long-term phase. According to the current forecast, the steelmaking sector will see a fall over the next 8 months. Well, the plantmaking relies on the good market results of the past. These 2 elements will come to balance each other, and we are gearing up to manage them as we did in the past. But then the 5- or 10-year market forecast is very different, having more impact on a global transformation, including a balance between consumption, production in developed countries as well as the CO2 impact for integrated steel mills. And we have to have a new vision that will let us adapt to what the markets will be in 5 to 10 years.
Thank you, President Benedetti. He will also be talking at the end of this conference when he will be drawing the conclusion. But before that, you will have a time. There's going to be a session for questions and answers. So you can place your questions, and we will be selecting some of them and we will be answering some of them. So please use the chat if you want to make questions.
Now let's talk about financial forecasts. We'll be discussing them with Alessandro Brussi, Chief Financial Officer. What can you tell us about the 2019, 2020 business year?
The group's revenues are still expected to be good in 2019, 2020, around EUR 3 billion, growing in the plantmaking sector and mostly stable in the steelmaking sector, which will aim to maintain production volumes achieved in the previous year, with approximately 1.3 million tons of product shipped.
The EBITDA operating margin remains high, driven by the plantmaking sector, while the steelmaking, while operating in a more introspective market with a lower visibility, will not less guarantee the group a satisfactory contribution in terms of margin. Thanks to the ABS ability to maintain customers loyal, always offering a timely, high-quality service. The 2019-2020 financial year will, therefore, present interesting net of contribution margins and a growing net profit.
But if you -- we should look even further ahead, what are the forecasts?
Well, the volumes, we will realize, thanks to the current orders and those are potential orders currently under negotiations are such to guarantee barring unforeseen circumstances. The year 2021 is better than the previous year with good contribution margin, both productive sectors. There are certainly elements of uncertainties, such as activities at exchange rates and possible slowdown in economic growth, but they are manageable. And I think we can improve by 5% to 10% in revenues and margins. We are also evaluating investments, especially in the steelmaking sector, to be done in [ Carniaco ] once the new quality wire rod mill has been completely started productions.
So figures, technology, the market, we've been addressing many different issues. But there is one common denominator of all this, the Danieli's vision. This is something we're going to discuss in detail with the help of the Chief Executive Officers, Giacomo Mareschi Danieli and Alessandro Trivillin, who has been coming back to our company. And so we -- they will be telling us about Danieli's vision.
Danieli was founded in 1914 and has been the world leader in the design and supply of the so called minimills since 1976, characterized by an elective furnace, fed with the scrap iron and ore, DRI. The modern automated minimill was designed in the Brescia steelworks in the 1960s. Danieli then exported to Spain, France, the U.S.A. and gradually all over the world. So after 45 years, we're still the front-runners in minimill technology and it is our intention to remain so by investing strongly in innovation and customer service. In the past 30 years, we have also been specializing in integrated steelwork sector, blast furnace, oxygen converter and flat product systems, standing out for our innovative technology focused on agility and performance. For this reason, it is well received by our customers.
Looking ahead, however, we are aware that the needs of the markets and customers change very quickly. Our mindset must be, the future is today. Speedy decisions and actions are a must to compete. We hold the vision for the future but focus on our actions today. This is obviously one of the basic concepts that must guide us in innovation.
So let's think about today. So what are the priorities today?
We are working a lot on execution to make sure that we always start from a detailed analysis followed by a careful planning and then, as a consequence, the day-to-day operations. We must further consolidate the operated mentality both to plan and then to effectively supervise, to anticipate and reduce the unforeseen. We all know that contingencies inevitably lead to dissatisfaction with both customers and company, especially for costs. And just to improve our ability to do macro and micro planning from the earliest sales stages, we are currently implementing specific training.
So in a nutshell, how do you manage to stay one step ahead all the time?
To stay one step ahead, we focused on 4 directions. The first is the sustainability in the long term. So the beacon that guided us in strategic decisions and in selecting investments on projects. And the second point is our DNA, innovation. We interpret it with the spirit of anticipating market needs and customer needs. Then third point is a concept, the added value. So every idea, every project and their relative investments must be evaluated in a win-win perspective for the company and customers. And then continuous improvement through analysis, action, measurement of results and consequent accountability. These 4 points are developed, considering the evolution of the context with the medium- to long-term vision, and in particular, the evolution brought by digital innovation and by a noted Industry 4.0.
I'd like to know what's new and modern in this approach.
This approach is even more necessary today to ensure that our customers are resilient to the volatility of the metal market as well as geopolitics, adjusting to economic trends to obtain satisfactory profitability on average. These are the goals that we are pursuing and that can be reached with a commitment of the entire team to fine-tune methods and the operational mindset, guaranteed customer satisfaction for timeliness and quality, but also with innovative and competitive plans in the long term. In doing so, we can achieve a solid foundation for the company and a sense of self-fulfillment.
Thank you to Trivillin and Mareschi Danieli, but the world is running fast. As we have heard, the future is today, what is Danieli automation's response? We'll be asking this to Antonello Mordeglia.
Following the worldwide trend oriented towards Industry 4.0, intelligence and artificial vision as well as robotics, Danieli automation is investing many resources, both in development and in the search for new products and applications in order to satisfy our customers. The market needs those focused on energy saving, energy recovery or energy solution -- energy storage solutions, which support the implementation of digital systems. There are more and more performing, modern and unique. The well-defined industrial project has for some years now directed the company towards a globally evolved reality, capable of creating extremely stable products and systems in their performance, which are exclusive in their sector. The Digimet business unit is transforming the current reality of automation, closely linked to the sensors you're seeing, mathematical models that evaluate and manage each phase of the process based on large data.
So you've been talking about your guidelines, but could you also give us an example of a specific project in this field?
After 4 years of an uninterrupted research and development, we started a Q1 for over 50 megawatts. So the first digital melter in the world, it brings incredible benefits and energy savings as well as reducing the costs of processing in a steel plant and all Italian patent. It is a real matter of pride for me to collaborate with an extremely talented and sometimes ingenious team of passionate and capable innovative but also humble technicians in expressing my feelings for the results achieved. This is a team that will be remembered in history for this incredible application. All this leads the company to be profitable and the team optimistic because of these unforgettable successes of technological as well as financial satisfaction will allow us to produce other useful applications in the present and future years.
Thank you, Antonello Mordeglia. These words come from inside the Danieli Group and are -- as what we understand that what is key here is the management of human resources. The Head of Human Resources is Camilla Benedetti. So we have been talking about digitization here is all pervasive. It includes, involves also HR, doesn't it?
Yes, we are using our matched digital and integrated platform to promote knowledge and enhance the skills, experience, performance, training and career paths of our people. The objective is to recognize and value merit and professional and managerial skills.
Speaking of innovation, we want to empower employees to help them unleash their energy and creativity and to help them do things differently, innovate and take care of details. How do we do it? Through the Danieli Innovaction Award, an annual contest based on the concept that new ideas can prove profitable and competitive for the future sustainable development of the company. We also welcome the digitization in Academy, our in-house business calls that delivered 200 online courses for about 124,000 hours in total to consolidate the wealth of technical and technological knowledge that is and will remain the asset and distinctive mark of Danieli. We collaborate with top-class Italian and foreign universities, research centers and regional institutes, engaging in study programs and providing factual guidance for integration in the job market.
Every year, we meet 1,000 young talents looking for opportunities. And 100 of them enter the company, attracted by the prospects of career development in an international context. They can follow specialized training paths, supported by qualified in-house mentors and they can gather hands-on experience. Our responsibility is to give a future to young people and the society we live in.
Yes. Talking about this, Danieli has always been very outward looking, but you also take action in the community, don't you?
We maintain our partnership with the Pio X Treviso College, which is open to both the children of employees and families of the local community. That's where traditional knowledge blends with an innovative approach to the English language and new technologies. In June, we obtained the certification as a Cambridge exam preparation center because we provide a specific language training to the students, thanks to the high quality of the educational offer and a structured approach to the teaching of English.
We focus on these aspects as much as we do in our core business.
Thank you, Camilla Benedetti. It's almost time to draw the conclusions. But as we promised, there's going to be a Q&A session. We will be replying to many of the questions that were submitted during the streaming. We selected many questions. One is about the Q1 technology. Mordeglia talked about it before. So he will be replying.
So the question is about the Q-ONE technology, why is this plan so revolutionary? Can it be used by anyone? And what financial advantages does it give to the steel producer?
It is revolutionary because it innovatively applies the different technology to connect the arc furnaces to the national electricity grid, avoiding disturbances and guaranteeing an optimization for the energy producer that leads to savings also for a steel producer.
But not only that, it generates important benefits in terms of consumption of the electrodes and the time required for the fusion which is significantly reduced. Therefore, producers lower emissions and a lower environmental impact. In the end, it can provide an average benefit, which can derive from EUR 8 to EUR 18 per ton produced depending on the type of furnace and country of installation, which can lead to a greater profit for the producer of 5%, 6%.
So beside the Q-ONE, another question is about the sectors with the greatest growth potential for Danieli or the sectors where there is room for diversification. I know the CEO, Alessandro Trivillin, is wishing to reply.
In the steelmaking part, there is a differentiation in terms of geographies. So there is more internationalization and we're also getting into more demanding markets. As to the service, well, for the plantmaking sector, we are rationalizing our product lines, and we are focusing on the development of our service department. We get lots of requests from our customers for a continuous presence of maintenance in the systems throughout the year.
Another question we selected among those that were coming in from the chat line. So there's always talk of excess steel production. But every year, the total volume continues to grow 3% in 2018. So is the steel sector undergoing a crisis or not? Giacomo Mareschi Danieli is going to reply.
Concept of steel prices is something cyclical in the market. In the past 20 years, there's always been some other material that tried to take over the primacy of steel in the construction sector. I'm thinking of plastic with some special type of glass and, most recently, aluminum. But steel, for better or for worse, has always managed to reinvent itself through steel producers that are very innovative category. It has always managed to reinvent itself as a lighter, stronger and high-performing and more sustainable material. We have to remember that steel is one of the few 100% completely recyclable materials and it's practically eternal. So I don't see a crisis in the steel material as the resource.
Another consideration is certainly the market. The market is cyclical by definition. And we made these considerations during the presentation of the budget just now. On the other hand, 3% of world growth can be considered a crisis because it certainly cannot cover the overcapacity that exists.
On the other hand, the average consumption of all the world is still so low that if you want to, there is plenty of room to grow again. Furthermore, we must consider that many production companies, more than 70%, are still using integrated technology. That is the one based on the high-temperature furnace. That is to say less environmental-friendly than minimills. 70% means that there is a lot of space for the conversion of these plants in the future. And therefore, rather than linking the steel crisis to the world growth, we should also see it in terms of renewal and sustainability of the steel industry.
Thank you for these answers, and thank you to the viewers, to our audience for having submitted these questions. But now it's time to draw some conclusions on the yearly results of the Danieli group. Of course, I'll be leaving the floor to Gianpietro Benedetti, the President. He is sit -- he is here next to me. Why do plant manufacturers prefer Danieli to your competitors?
Well, good question. However, I would say that there are different factors. Basically in line with our motto, we are partners in continuous innovation and we work with our customers to be front runners, to be competitive. We cover about 40% of the market with long products, and we are proud to count among our customers, worldwide champions in competitiveness and quality on this production range. So partnership, innovation and factories.
We continue to have factories. We don't do shopping around and high-quality material is produced at our plants in Italy, Sweden, China, Thailand, India and so on. So innovation, service and competitive costs too. So offer a high-quality product at a competitive price. And to do this, as you have heard, we are reviewing the organization and the structure so to become faster, more efficient and more customer service oriented. As has been mentioned, the market is currently in a vibrant phase. Therefore, steel consumption and prices are falling, but this is normal. So no one is surprised. We are used to working in the mid-range, in average between high and low. And the most challenging is the vision for the next 3 to 10 years.
As Giacomo said, the needs of the markets will change, both in terms of consumption and the environmental impact both to replace plastics with light and strong steel. And all these must be shared, as I said, in a vision that we are elaborating, programming and performing. So good that there is a lot to do, but we're satisfied. We have reasonably supported the volatility of the last 5 years, and we plan to do so also in the next. And above, we are committed to defining the vision of the next 5 to 10 years in a suitable matter. Thank you.
Thank you, President. And thank -- thanks to the speakers and thank to our audience for having actively participated in this presentation. And see you at the next presentation of the Danieli Group result.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]